Yellen: Too Soon to Tell How Much Weather Has Softened Data

Federal Reserve Chairwoman Janet Yellen commented on recent weak economic data in the one addition to testimony delivered before the Senate today compared to her prepared remarks to the House two weeks ago.

Since her last testimony, she said, “a number of data released have pointed to softer spending” than analysts expected. That may reflect in part, “adverse weather conditions,” she said. “But at this point it is difficult to discern exactly how much.” She said officials would be tracking the data carefully to estimate whether it warrants a shift in their outlook.

Separately, Ms. Yellen took her predecessor Ben Bernanke‘s tack on fiscal policy. It is a drag in the short-run but deficits need to be addressed in the long-run. She avoided asking Congress for fiscal stimulus in the short-run, but urged Congress at least not to do any more harm.

Fiscal policy in recent years “has been quite tight and has imposed a substantial drag on spending in the U.S. economy,” Ms. Yellen said. She added that “fiscal policy drag” has placed a larger burden on monetary policy, which in the U.S. is managed by the Fed.

“I do think the economy is beginning to recover and we have made progress,” Ms. Yellen said. “At a minimum, I would hope that fiscal policy would do no harm.”

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